Report: US TV Advertising Market Will Struggle in Post-Election & Olympics Year

written by: Richard Kastelein

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Published on Tuesday, 29 January 2013 13:10

The emergence of Second Screen Social TV is affecting the TV industry according to a new report from Magna Global, presenting new opportunities as well as challenges for marketers and media owners. Despite the complexities in the ecosystem, the difficult upgrade of media measurement and the painful redefinition of many business models, but they believe we have only scratched the surface of this new world: advertising on mobile devices is forecast to grow to $11.5bn in the next five years and by 2017 it will represent 18% of total digital advertising and 6% of total media advertising in the US.

Vincent Letang, EVP, Director of Global Forecasting said:

"The concept of mobile advertising started with smartphones but tablets are changing everything, rapidly establishing themselves as universal media players (TV programmes, movies, radio, news, magazines) in a way never achieved through "personal" computers. By their versatility and user-friendliness, tablets are increasing digital media usage and redefining social media, online video and e-commerce. Their influence will be felt far beyond on-the-go media usage as a growing proportion of that happens in the home. Part of that usage is cannibalizing media time spent on desktops and laptops, but tablets bring incremental media exposure, partly through multitasking" .

Key points of the report:

• US core media owners advertising revenues grew +4.7% in 2012 to $153.4bn.
• Excluding record levels of incremental revenues generated by non-recurring events - Olympics ($640m) and Political ($2.8bn) (P&O) – the underlying growth was a more modest +2.7%.
• Digital media grew by +14.4% with online video reaching $2bn in advertising revenue and mobile advertising doubling in size to $3bn.
• For 2013, amidst slow economic recovery and a tough comparison, core media owners advertising revenues are expected to grow by +0.6% (still +2.7% ex-P&O).
• Television revenues will decline by -3.0% (compared to -1.4% previously forecast).
• Growth in digital media (+14.2%) and mobile advertising (+55.0%) will offset revenue declines in television, print and radio.

Magna Global has adjusted its 2012 estimates and revised its 2013 forecasts for the US advertising market. Excluding the incremental revenues derived from Political and Olympic ad spending, core media owners ad revenues grew by +2.7% in 2012. Digital media remained strong (+14.4% to $36.3bn) driven by mobile advertising (up more than 80% to nearly $3bn) and search (+18.4% excluding mobile, to $17.5bn). Traditional banner display formats had minimal growth (+1.5% to $13.7bn) due to price declines. Online video also experienced price decreases in 2012 as the difference between online video (e.g. Hulu) and broadcast TV costs narrowed significantly; a continued increase of supply and consumption of online video content led, however, to another year of double-digit growth (+15.0% to $2.1bn). Overall, digital media represents 23.7% of core media advertising in the US, which is now bigger than newspapers and magazines combined. However, in some of the most advanced European markets (e.g. UK) digital media already controls more than 30% of total advertising, suggesting there is still room for growth in the US too.

The various segments of television experienced widely contrasted trends in 2012. English-speaking national TV networks advertising revenues decreased -2.6% to $13.1bn on a normalized basis, but increased +2.2% if factoring in $640m of non-recurring Olympic ad spend. National cable television keeps gaining audience share and advertising revenues from broadcast networks, as it grew by +5.1% to $23.1bn. National cable represents 59% of total national television, compared to 40% in 2001, against 33% for English-Speaking national broadcast networks, 3% for Spanish-speaking broadcast networks and 5% for syndication. Total national television advertising (cable and broadcast, ex-P&O) increased +2.4%.

Local TV media owner revenues increased +1.5% (ex-P&O) to $19.8bn as the media benefited from a healthy automotive market.

2013: healthy corporations will keep investing in their brands despite slow economic growth (+0.6% growth for core media, +2.7% without P&O)

National television is the category they have revised most significantly, down to +2.1% from +4.8% in October. Since the beginning of the broadcast season in September, the scatter market prices have showed very little "premium" over the upfront CPM inflation despite the fact that primetime ratings have been weaker than expected (-5% for broadcast networks, -2% for cable networks, on adults 18-49, including sports) and broadcasters had to serve extra spots to meet their guaranteed impact.

That unusual pattern reveals weak demand. As a result, national broadcast revenues (ex P&O) were down by -5.5% in the second half of 2012 and we expect a similar softness throughout the first part of 2013. English-speaking national network TV will be impacted the most from this trend, with revenues decreasing by -6.4% (or -1.8% ex-P&O) in 2013. National cable will continue to benefit from better ratings and gain market share from broadcast: revenues will thus grow +4.0%. Local TV is forecast to grow +1.4% on a normalized basis and drop -9.1% when including (the lack of) Political advertising. Overall, television media owners ad revenues are now expected to decrease by -3.0% in 2013 (local and national, broadcast and cable, incl. P&O).

Digital media is largely unaffected by cyclical spending and will continue to grow double-digits in 2013 (+14.2% to $41.5bn) with mobile advertising alone growing +55% to $4.5bn.